Analysis

Administrative and digital solutions tackling error, evasion and fraud in contribution collection in Africa

Analysis

Administrative and digital solutions tackling error, evasion and fraud in contribution collection in Africa

Preventing and detecting error, evasion and fraud (EEF) is crucial for social security systems. Error, evasion and fraud have a direct impact on different aspects of social security. On the one hand, the economic impact related to non-collection of contributions and undue delivered benefits may undermine the economic sustainability of the schemes. On the other hand, the non-economic impact concerns the loss of social rights by workers and their dependents, undermining the fair economic competition through social dumping and the loss of trust in the social security system (Goveia and Sosa, 2016).

EEF in contributions account for the stagnating and sometimes shrinking of the effective coverage of contributory social security schemes by omitting individuals and populations groups legally covered by social security legislation. It equally accounts for the mismatch between legal and effective coverage rates of contributory schemes.

In practice, the distinction between error, evasion and fraud is ambiguous. However, there is a clear theoretical difference between errors on the one hand as opposed to evasion and/or fraud on the other. Errors are unintentional while evasion and fraud are intentional acts. Error, evasion and fraud have one thing in common – they erode the potency and financial viability of social security schemes/programmes, hence constitute an unavoidable topic for social security administrations.

To tackle EEF in contribution collection, it is imperative to apply strategies and measures to enhance contributors' compliance, especially employers' who often carry out registration and contributions on behalf of employees.

The International Social Security Association (ISSA) supports social security institutions in carrying out these complex tasks through several ISSA guidelines and related knowledge. Concretely, while the ISSA Guidelines on Contribution, Collection and Compliance (ISSA, 2019a) includes a specific chapter on Fraud control, the ISSA Guidelines on Error, Evasion and Fraud in Social Security Systems provide orientations to address these issues through a comprehensive approach covering the different types of fraud (ISSA, 2019b).

Approaches to address EEF in contribution collection

The different strategies to tackle EEF in contribution collection aim at ensuring that contributors comply with their obligations. These strategies, which intend to cover the schemes and functions managed by an institution entirely, can combine three types of approaches:

  • Prevention, which aims at limiting opportunities for EEF through regulatory, operational and awareness measures.
  • Detection, which enables institutions to identify EEF cases ideally as early as possible. Detection measures are increasingly based on data-driven technologies such as Analytics and Artificial Intelligence.
  • Deterrence actions, which provide the means to prosecute and sanction non-compliant contributors. They are mainly based on regulations defining the sanctions and procedures to carry out the prosecution.

EEF in contribution collection are characterised by omissions, misstatements, misinterpretation and mis-application of the law. This occurs because social security and labour legislation ambiguities afford legal loopholes and/or lapses, favouring the evasion of social security contributions.  The actors involved in EEF generally rely on operational processes, notably the identification and registration of contributors as well as declaration and recovery of contributions to perpetrate EEF. Ineffective detection and deterrence of EEF in these operational processes will translate to the impacts described above. Nonetheless, although success in the detection measures enables institutions to identify and sanction fraudulent contributors and support deterrence, it might bring about negative publicity for social security administrations and show operational shortfalls culminating in EEF. Therefore, preventative and deterrence measures should be prioritised over detection-oriented ones.

Concretely, EEF in contribution collection takes one of the following forms:   

  • Non-adherence and registration of susceptible contributors.
  • Non-declaration of contributors and/or insurable earnings
  • Misstatement of insurable earnings, application of incorrect contribution rates and incorrect computations
  • Mismatch between declarations and payments

In combatting EEF, the goal is to attain complete adherence of eligible contributors and full compliance with the declaration and payment of social security contributions. While this remains a daunting task, ISSA member institutions make progress through innovative administrative, digital and online solutions to reduce EEF in contribution collection processes. Based on the submissions of the ISSA member institutions for the ISSA Good Practice Award Competition for Africa – 2020, the following section makes an appraisal of the practical approaches to tackle EEF for greater efficacy and operational efficiency.

A synthesis of administrative and digital solutions to combat EEF in contribution collection processes

To reach the goal of conformity and full compliance with the declaration and collection of contributions, it is important for social security administrations to tackle EEF at the source. This will warrant the implementation of measures to collate information and generate data for decision-making purposes and to ensure that such information is authentic, accurate and complete, as well as ensure it is safeguarded.

Experiences of ISSA member institutions in Africa show a great array of practical administrative and digital solutions to combat EEF at each operational stage including outreach and sensitisation, identification and registration, computation and declaration of contributions. These efforts continued regarding collection, recovery and receipt of contributions, enhancing conformity and enforcing compliance.  

i) Outreach and awareness

The lack of awareness and/or knowledge of social protection rights and obligations are a major driver of EEF in social security. Furthermore, in a context of high informality compounded by fragmentation of social security arrangements, it may be ambiguous as to who is subject to a given social security legislation. This may prompt non-adherence leading to the evasion of social security contributions. Disseminating knowledge on social security legislation and outreach to target population groups is therefore an imperative first step in combating EEF in contribution collection processes and constitutes a widely recognised preventive approach recommended in sections F of the ISSA Guidelines on EEF (ISSA, 2019b) and Contribution Collection and Compliance (ISSA, 2019a).

In the light of this reality, social security administrations are adopting new solutions to reach out to the public and build awareness among stakeholders on their social security rights and obligations. Table 1 below presents a summary of some innovative practices adopted by ISSA member institutions in Africa.

Table 1. Innovative solutions and approaches in outreach and sensitisation
Strategy Country/Institution Good practice Key design features
Prevention.
Adoption of new communication channels to complement traditional strategies
Algeria – National Social Insurance Fund for Employees (Caisse nationale des assurances sociales des travailleurs salariés) "Service public dédié à la sécurité sociale” – a public service dedicated to social security (National Social Insurance Fund for Employees, 2020a)
  • Radio programme to disseminate information on social security rights and obligations to target population groups
  • Direct involvement of executive staff and experts in information dissemination programmes
Prevention.
Adopting of new ICT solutions to reach new population groups
Kenya – Local Authorities Pension Trust Leveraging digital communication platforms to drive pension coverage in Kenya (Local Authorities Pension Trust, 2020)
  • Leverage on high mobile phone penetration to reach remote and passive users of social security services and products
Prevention.
Applying behavioural insights in communication
Morocco – Pension Fund of Morocco (Caisse marocaine des retraites) – CMR The Forum Theatre (Pension Fund of Morocco, 2020)
  • Raising awareness on rights and duties through theatre plays
Source: Good Practices of ISSA member institutions in Africa, 2020.

ii) Identification and registration

With effective outreach and awareness among the different population groups subject to contributory social security legislation, social security institutions progress to the identification and effective registration of contributors – employers and workers. At this stage, institutions collect relevant data usually through employers – generally biography data, employment status, employment conditions, earnings, family status, and so on.

A major challenge resides in ascertaining the authenticity of documents supplied in support of declarations made by contributors and ensuring the accuracy and completeness of information entered into social security registers. At this stage, the inability to detect and prevent omissions and/or [un]intentional misstatements translate to the ongoing EEF issues in social security.

The administrative capability in terms of competence and tact of the staff as well as mastery of the applicable legislation are crucial to detect, prevent and deter EEF at this stage. However, as collusion between internal and external actors would aggravate the exposure to EEF, internal control mechanisms support  enhancing adherence, ascertaining the authenticity of documents as well as completeness and accuracy of information and documents supplied by users of social security systems.

Table 2 below presents a summary of some innovative practices and approaches adopted by ISSA member institutions in Africa in response to the risks of EEF at this stage.

Table 2. Innovative solutions and approaches in identification and registration
Strategy Country/Institution Good practice Key design features
Detection and prevention.
Computerisation of operational processes
Guinea – National Social Security Fund (Caisse nationale de sécurité sociale) – CNSS Computerised management of the registration, collection and accounts-keeping processes (National Social Security Fund, 2020a)
  • Data cleaning through computerisation
  • Computerisation of registration to avoid double registration
  • Systematic information update and records keeping
Prevention.
Incentivise adherence and simplifying compliance with social security legislation
Nigeria – Nigeria Social Insurance Trust Fund (NSITF) Extending coverage and provision of social assistance (Nigeria Social Insurance Trust Fund, 2020)
  • Use of electronic and digital solutions to simplify and facilitate registration
  • Minimising compliance cost by reducing queuing and waiting time
Detection and prevention.
Fight under‑declaration by using Biometrics to identify workers
Guinea – National Social Security Fund (Caisse nationale de sécurité sociale) – CNSS Biometric identification of insured persons (National Social Security Fund, 2020b)
  • Biometric registration and delivery of biometric cards
  • Employers have to declare all workers using a biometric card
Source: Good Practices of ISSA member institutions in Africa, 2020.

iii) Declaration of insured earnings and computation of contributions amounts

Declaration of insured earnings and computation of contributions is a more regular and repetitive exercise in social security administration. The regularity, correctness and completeness of declarations and payment of contributions are central in the fight against EEF.

Irregularities in declarations of insured earnings - often submitted by employers - and in the calculation of contributions mark the apex of EEF in social security because it affects both the social security system and insured persons. They erode the financial viability of social security systems and impede the accumulation of social security rights of already covered population groups.

Conscious of the high likelihood and the direct negative financial impacts of EEF in declarations and collection of contributions, most social security administrations are concerned with to tackling EEF at this stage. Table 3 below presents a summary of some innovative practices and approaches adopted by ISSA member institutions in Africa.

Table 3. Innovative solutions and approaches in declaration and computation of contributions
Strategy Country/Institution Good practice Key design features
Detection.
Detection of potential fraudulent employers
Tunisia – National Social Security Fund (Caisse nationale de sécurité sociale) – CNSS Automated IT system for controls (National Social Security Fund, 2020)
  • End-to-end automation of the controls process
  • Institutional interoperability platform for data matching and fraud targeting
Prevention.
Business process automation
Côte d’Ivoire – Social Insurance Institute - National Social Insurance Fund (Institution de prévoyance sociale - Caisse nationale de prévoyance sociale) – IPS-CNPS Automation of employer social security contribution declaration activities through the implementation of a web app called "e-Cotisations" (Social Insurance Institute - National Social Insurance Fund, 2020)
  • Establishment of web platform
  • Interoperability between platform and databases
  • Automated information validity checks prior to submission
Algeria – National Social Insurance Fund for Employees (Caisse nationale des assurances sociales des travailleurs salariés) Employer platform: New electronic services to dematerialise declarations and reduce administrative procedures. (National Social Insurance Fund for Employees, 2020b)
  • Online platform for declarations and contribution payment
  • Automatic registration of employees
Source: Good Practices of ISSA member institutions in Africa, 2020.

iv) Collection, recovery and receipting of contributions

With improved checks on declarations to detect and address EEF, social security administrations are confronted with a second wave of risks of EEF with respect to the recovery of declared contribution amounts from employers and insured persons. These include but are not limited to the risks of misappropriation of contributions by employers and recovery agents, falsification of receipts by staff, as well as erroneous allocation of collected amounts.

Table 4 below presents a summary of some innovative practices and approaches adopted by ISSA member institutions in Africa.

Table 4. Innovative solutions and approaches in collection, recovery and receipting of contributions
Strategy Country/Institution Good practice Key design features
Deterrence.
Insourcing business operations
Tunisia – National Health Insurance Fund (Caisse nationale d’assurance maladie) – CNAM Direct collection of public sector health insurance contributions: A financial exercise to promote social security schemes' financial autonomy (National Health Insurance Fund, 2020)
  • Legislative amendments to reinforce the autonomy of social security institutions
Prevention and detection.
Minimising interference and staff intervention in the payment and receipting of social security contribution
Cameroon – National Social Insurance Fund (Caisse Nationale de Prévoyance Sociale) – CNPS Online payment of social security contributions (National Social Insurance Fund, 2020a)
  • Leveraging technological advancements to improve operational efficiency and combat EEF
Digital receipt (National Social Insurance Fund, 2020b)
Source: Good Practices of ISSA member institutions in Africa, 2020.

v) Enhancing conformity and enforcing compliance

While outreach and awareness, identification and registration, declaration and computation of contributions as well as collection and receipting of contributions  allows social security administrations to combat EEF in contributions, there is usually a proportion of EEF not captured and addressed  by these measures. These include cases of deliberate concealment of employees by contributing employers, understatement of insurable earnings, manipulation of declarations, non-transfer of withheld contributions to the social security administration, among others.

Enhancing conformity and enforcing compliance are composed of a set of measures aimed at ascertaining the completeness of declarations i.e. the full declaration of insurable earnings, as well as the correctness and accuracy of calculations and declarations – application of right contribution rates on the right insurable base. It equally entails checks and investigative controls to ensure that all persons susceptible to social security contributions are fully declared and pay contributions in conformity with the provisions of the applicable legislation, thereby reducing the incidence of EEF.

Table 5 below presents a summary of some innovative practices and approaches adopted by ISSA member institutions in Africa to enhance conformity and enforce compliance.

Table 5. Innovative solutions and approaches in enhancing conformity and enforcing compliance
Strategy Country/Institution Good practice Key design features
Prevention and detection.
Adopting automation, digital and online solutions
Algeria – National Social Security Fund for Non-Salaried Workers (Caisse nationale de sécurité sociale des non-salariés) – CASNOS Web and mobile applications (National Social Security Fund for Non-Salaried Workers, 2020)
  • Use of new digital solutions to automate and simplify operational processes and to minimise human interference
Cameroon – National Social Insurance Fund (Caisse Nationale de Prévoyance Sociale) – CNPS Online Clearance Certificate (National Social Insurance Fund, 2020c)
Detection.
Detection of potential fraudulent employers
Tunisia – National Social Security Fund (Caisse nationale de sécurité sociale) – CNSS Automated system for controls (National Social Security Fund, 2020)
  • Selects employers to audit by applying Analytics techniques
Detection.
Share information with stakeholders
Democratic Republic of the Congo – National Social Security Fund of Public State Employees (Caisse nationale de sécurité sociale des agents publics de l’Etat) Establishment of an online service or web application for consulting contribution payment history: "Cotisation 1.0” (National Social Security Fund of Public State Employees, 2020)
  • Enable employees to control contributions paid on their behalf
Source: Good Practices of ISSA member institutions in Africa, 2020.

Concluding remarks

Error, evasion and fraud is a central topic in social security systems and is increasingly addressed by institutions. EEF in contribution collection impacts on social security institutions, social security systems and society as a whole. At the institutional level, ineffective management and mitigation of EEF can bring social security administrations to disrepute and have far-reaching consequences on the financial viability and long-term sustainability of social security systems. At the societal level, EEF can jeopardise the capability of social security schemes in responding to their mandates.

The risks of EEF in contribution collection are apparent at each stage of the operational processes of social security administration. They are increased by the lack of awareness of social protection obligations, informal employment contexts and fragmented social security arrangements and where ambiguity as to who is eligible to contribute under a defined programme prevails.

ISSA member institutions in Africa are developing innovative approaches to improve the outreach and awareness of the stakeholders, ease the identification and registration, facilitate the declaration and collection of contributions, and detect potential fraud cases. These measures have led to better outcomes in addressing EEF in social security administration.

The analysis of Good practices submitted by ISSA member institutions for the ISSA Good Practices Award Competition for Africa – 2020 reveal that:

  • There is a consensus among ISSA member institutions in Africa to optimise digital and online solutions and minimise human intervention and interference in situations with a high likelihood of EEF. This is apparent in the increased automation and digitalization of registration and contribution collection processes that enable to prevent EEF.
  • There is a growing development of information and awareness practices among social security institutions in Africa that contribute to preventing EEF.
  • ISSA member institutions are steadily developing innovative approaches to enforce compliance through different approaches involving technologies, human control and partnerships.

Modernising contribution collection operations through the adoption of technological and digital solutions improve operational efficacy and efficiency. It equally helps in curbing the incidence of EEF in social security as opposed to orthodox approaches of manual registration, declarations and receipting of social security contributions. However, this comes with new forms of risks and opens new avenues for EEF that presence-based control prevent, such as identity theft, internal data modification, and declaration of fictitious operations. In the light of this reality, the need for continuous improvement to respond to the ever-evolving nature of EEF in contribution collection processes is irrefutable.

Despite progress towards automation and digitalization, the human agency remains central to social security administration. It is therefore important for social security administrations to retrain staff to adapt to the ever-evolving needs of the society as a whole and of users of social security systems and devise new approaches to tackle new forms of EEF. Institutions should also develop a culture of ethics among leaders and staff.

The International Social Security Association is a unique global partner that can accompany social security administrations towards improved governance and better management of social security institutions in the drive towards modernity and the fight against EEF, especially through various ISSA Guidelines providing guidance in developing effective strategies.  

References

Goveia, L.; Sosa, A. 2016. Framework to address error, evasion and fraud in social security systems: A compliance-based approach. Geneva, International Social Security Association.

ISSA. 2019a. ISSA Guidelines on contribution collection and compliance (Revised and updated version). Geneva, International Social Security Association.

ISSA. 2019b. ISSA Guidelines on error, evasion and fraud in social security systems. Geneva, International Social Security Association.

Local Authorities Pension Trust. 2020. Leveraging digital communication platforms to drive pension coverage in Kenya (Good practices in social security). Geneva, International Social Security Association.

National Health Insurance Fund. 2020. Direct collection of public sector health insurance contributions: A financial exercise to promote social security schemes' financial autonomy (Good practices in social security). Geneva, International Social Security Association.

National Social Insurance Fund. 2020a. Online payment of social security contributions (Good practices in social security). Geneva, International Social Security Association.

National Social Insurance Fund. 2020b. Digital receipt (Good practices in social security). Geneva, International Social Security Association.

National Social Insurance Fund. 2020c. Online Certificate for Submission (Good practices in social security). Geneva, International Social Security Association.

National Social Insurance Fund for Employees. 2020a. Production and presentation of a radio programme entitled “Service public dédié à la sécurité sociale” (Good practices in social security). Geneva, International Social Security Association.

National Social Insurance Fund for Employees. 2020b. Employer platform: New electronic services to dematerialise declarations and reduce administrative procedures (Good practices in social security). Geneva, International Social Security Association.

Nigeria Social Insurance Trust Fund. 2020. Extending coverage and provision of social assistance (Good practices in social security). Geneva, International Social Security Association.

National Social Security Fund (Guinea). 2020a. Computerised management of the registration, collection and accounts-keeping processes (Good practices in social security). Geneva, International Social Security Association.

National Social Security Fund (Guinea). 2020b. Biometric identification of insured persons (Good practices in social security). Geneva, International Social Security Association.

National Social Security Fund (Tunisia). 2020. Implementation of an automated IT system for controls (Good practices in social security). Geneva, International Social Security Association.

National Social Security Fund for Non-Salaried Workers. 2020. Launch of web and mobile applications for social security (Good practices in social security). Geneva, International Social Security Association.

National Social Security Fund of Public State Employees. 2020. Establishment of an online service or web application for consulting contribution payment history: "Cotisation 1.0” (Good practices in social security). Geneva, International Social Security Association.

Pension Fund of Morocco. 2020. Forum theatre: A communication channel for developing social security culture/Communicating changes in behaviour to raise awareness of user rights and duties (Good practices in social security). Geneva, International Social Security Association.

Social Insurance Institute - National Social Insurance Fund. 2020. Automation of employer social security contribution declaration activities through the implementation of a web app called "e‑Cotisations"  (Good practices in social security). Geneva, International Social Security Association.